Now that you understand debits, credits, and account categories, let's tackle the most practical skill: analyzing real business transactions.

Every business transaction is like solving a puzzle. You need to figure out exactly which accounts are affected and how.

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What makes transaction analysis feel like solving a puzzle to you?

Here's your systematic approach to transaction analysis. Think of it as a three-step detective process.

Step 1: What happened? Step 2: Which accounts are affected? Step 3: Do these accounts increase or decrease?

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Why do you think following the same steps every time helps?

Let's practice with a simple transaction: "The business bought office supplies for $500 cash."

Step 1: What happened? The business exchanged cash for supplies. Step 2: Which accounts? Cash and Office Supplies.

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Pause and predict: does Cash go up or down, and what happens to Office Supplies?

Step 3: Do these accounts increase or decrease?

Cash decreases (we spent it). Office Supplies increases (we now own supplies). Both effects happen simultaneously - that's why we record both!

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Why is it essential to record both the cash decrease and supplies increase?

Now let's connect this to debit and credit rules from our previous lessons.

Cash is an asset that decreases, so it gets a credit. Office Supplies is an asset that increases, so it gets a debit.

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Can you recall which account types increase with debits?

Here's another example: "The business provided services to a customer for $1,200 on credit."

Step 1: Services provided for future payment. Step 2: Accounts Receivable and Service Revenue. Step 3: Both increase.

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Why would both of these accounts increase in this transaction?

Remember: transaction analysis is about understanding the economic reality first, then applying the mechanical rules.

Always ask yourself: "What did the business give up, and what did it receive?" Every transaction involves this exchange.

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Ready to practice analyzing transactions on your own?

Type

Fill In The Blanks

Markdown With Blanks

Let's analyze this transaction: "The business paid $800 cash for equipment."

Step 1: What happened?
The business exchanged [[blank:cash]] for [[blank:equipment]].

Step 2: Which accounts are affected?
[[blank:Cash]] and [[blank:Equipment]]

Step 3: Account changes?
Cash [[blank:decreases]], Equipment [[blank:increases]]

Suggested Answers

• cash
• equipment
• Cash
• Equipment
• decreases
• increases